LC,
Yes, production is up at lafranchi for BMC and finally we understand the extent of their forward contracts which run out half way through this year - with all their (25% interest) production unhedged after that their gross cashflows from downunder should be quite good - for 16 months.
If lafranchi can continue at this type of output for 6months, then increase by 50% by adding 10,000 tonnes/month from winner, I've got $5.6M Q1, $5.4M Q2, $12M Q3, $16M Q4 gross cashflows for this year by looking at 3.2M lbs @$17/lb Q1, 3.2@16 Q2, 4.0@15 Q3 and 5.6@14 Q4. I use declining Ni prices because supply will be coming on, and the forward prices reflect that. These numbers are assuming costs as per mentioned in their recent MD&A, and expected losses on forwards contracts.
Now, these 'back of envelope' numbers show a plausible gross cashflow level of $39M 2007, $58M 2008 and back to $40M 2009 forwards. Take some off for future exploration, construction of the winner decline, increases in costs/ton by having to transport winner ore, because labour costs are getting higher not lower, and for taxes on these profits (almost none in 2007, but more in 2008, then with no more amortization after two years, a sustained higher level in 2009 and beyond). I'd say useable after tax cashflow numbers (net to BMC from Lafranchi) to ponder might be $30,45,27,27,27,27,27,27M so NPV@10% = $160M NPV@15% = $137M
@1.25/share you currently buy into this argument for only $74M, and get paid back in roughly 2-2.5 years. Throw in the value they have in their other exploration targets and the ability for downunder to grow through future exploration, and the value here is quite forseeably $2/share. I'd say its a safe bet for $2 sometime this year, especially after they report their sept numbers, as long as nickel stays over $15.
Now, their 25% interest only gives them 4M lbs Ni in 2007, 5.6M 2008, then 4M onwards, for about 8 years - the upside is it may not be hedged.
Compare that to LBE's 4.5M 2007, 6.5M 2008, 11.9M 2009. Or CML's proposed 11-14M/year starting in 2008. |
